The House and Senate have agreed on a tax plan that stands to change a lot for Americans but for real estate, the biggest changes could potentially affect if and how homeowners deduct mortgage interest and property taxes.


Here are six elements of the tax plan that could affect buying, selling and moving.


  1. Mortgage interest deduction. This deduction is a way to make owning a home more affordable by cutting the federal income tax that qualifying homeowners pay by reducing their taxable income by the amount of mortgage interest they pay. The new bill, however, scales the interest on debt up to $750,000 – down from $1 million – for people who buy homes after Dec. 15, 2017.


  1. Mortgage interest deduction for second homes. Currently, you can deduct interest on mortgage debt on your primary and secondary homes and while the new bill will keep this part of the tax law, it will reduce the amount of eligible mortgage debt to $750,000, too.


  1. Property tax deduction. Currently, tax law allows qualifying taxpayers to reduce their taxable income by the total amount of property taxes they pay. The new bill limits the deduction to a total of $10,000 for the cost of property taxes and state and local income taxes.


  1. Home equity deduction. In addition to mortgage interest deduction, current tax law includes a deduction for interest paid on home equity debt ‘ … for reasons other than to buy, build or substantially improve your home.’ An example of this would be borrowing from a home equity line of credit to pay tuition and having the interest you pay be tax-deductible. However, the new bill eliminates the deduction for interest paid on home equity debt.


  1. Capital gain exclusion. When selling a house, the capital gain is the difference between the price you paid for it and the price you sold it for – and that gain is treated as taxable income. Currently, if you’ve lived in your house for at least two of the five years immediately preceding the sale, married taxpayers filing jointly are allowed to exclude up to $500,000 of this capital gain as income without having to pay federal income tax on it. Single individuals and married taxpayers filing separately have a capital gain exclusion capped at $250,000.


Thankfully, as it stands, the new bill doesn’t yet alter the capital gain exclusion for homes as the House and Senate have removed any changes from the final bill.


  1. Moving expenses. You are currently able to deduct some moving expenses when you move for a new job after meeting criteria involving distance and timing of the move. Under the new bill, however, only members of the armed forces on active duty will be allowed moving-expense deductions.


While nothing is yet set in stone, we think it’s always a good idea to know how prospective legislation can affect you and your biggest investments – your real estate.


From buying to selling a home, our experienced agents are here to help you navigate every step of the way. Because at DeLeon Sheffield Company, ‘We’re More Than Realty; We’re Family.’



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